Tuesday, September 11, 2012

FREE COAL ALLOCATION: A MASTERPIECE MANIPULATION

In a country where all waste and garbage is sold and is the earning method of thousands of people, the decision of government to allocate blocks of coal, the black gold, absolutely free of charge to the cronies, stooges, and near and dear ones of those in power is simply a master stroke in throwing dust in the eyes of Indian citizenry, in the name of welfare of the poor.

  • Myths about coal cost contribution to electricity generation
Let us try to understand the impact of allocations on power generation and heavy industry like steel and cement. Recently it was brought out by NTPC that a 25% decrease ( from $100 to $75 a ton ) in international coal prices will bring down the cost of power generation by mere 7 - 10 paise per unit, a meagre decrease of 2-3% in the power generation cost at the plant for a coal cost reduction of Rs 1100/ton. The fuel component of power generation is merely 35-40 paise per unit even when coal is priced at Rs 4000/ton and the cost to consumer multiplies manifolds because of plant capital cost, manpower costs, transmission and distribution costs etc.. Where is the concern for the common man or providing stimulus to growth seen when in one go the governments increase rates to consumers by more than 30%.
In steel production, coal contributes 8 to 12% to the cost of steel whereas in cement industry the contribution of the coal to the cost of cement is about 18-20% and the coal cost includes royalty, mining, coking ( in case of steel production ) and logistics.
The coal block allocation or auction and the loss to revenue relates only to the royalty money. Incidentally the royalty content in coal price of about Rs1500/ton supplied by Coal India is Rs 180/ton. In the light of all this, arguments for coal block allocations are nothing more than a hoax and seem to be governed by everything other than any noble intention. In fact such decisions are bleeding the Indian economy and are putting India's march to prosperity backwards by a couple of years.
  • In a recent report on huge profits by Jindal Power, Naveen Jindal a congress M.P. and Chairman and MD of Jindal Power says," Huge Profits not because of cheap coal " but are because of efficient planning, implementation and operations.
But still the government insists that coal block allocations free of charge have been done in the interest of the country and its poor masses. Somebody out of this committed polity with lot of hidden agenda should venture to throw some light on the following basic questions:


  • Who is the owner of the land?
  • Even lease in residential and commercial property keep on getting revised upwards but coal allotted and use of thousands of acres will be free for all times to come even if its prices escalate manifolds which is going to be a most likely scenario
  • The change to auction route according to government is a long and tedious affair requiring legislation . These guys managing the affairs of the government in all their wisdom could not think in terms of royalty payments in their eagerness to favour themselves, fianancially, politically or for any other consideration .